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Massachusetts Aims to Cut Growth of Its Health Costs

The Massachusetts legislature passed a first-in-the-nation bill on Tuesday that seeks to limit the growth of health care costs in the state.

The bill would not allow spending on health care to grow any faster than the state’s economy through 2017. For five years after that, any rise in health care costs would need to be half a percentage point lower than the increase in the state’s gross domestic product.

Legislative leaders say the bill, which includes other cost-slowing provisions, could save as much as $200 billion in health care spending over the next 15 years.

Although Massachusetts, under Gov. Mitt Romney, in 2006 became the first state to require most residents to have health insurance — the model for President Obama’s national health care overhaul — the law did little to slow health care costs that were already among the highest in the nation. Such spending has increased by 6 percent or 7 percent a year recently, compared with annual state economic growth of less than 4 percent.

Gov. Deval Patrick, a Democrat, has been pushing for a plan to rein in health spending, promising that Massachusetts would show other states how to “crack the code on costs.” He is expected to sign the bill, which was filed just before the end of the legislative session as a compromise plan after the House and the Senate passed differing versions.

According to a summary of the bill released by legislative leaders on Tuesday, a new commission would monitor the growth in health costs and enforce the spending targets. But the bill contains no real penalty for missing the targets, and some consumer advocates are skeptical.

“These targets have the potential to establish a clear incentive to make real changes that will reduce costs, eliminate waste and improve patient care,” Cheri Andes, executive director of the Greater Boston Interfaith Organization, said in a statement. “However, to accomplish these aims, an enhanced enforcement mechanism will likely be necessary.”

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The bill includes a number of other provisions meant to cut health care costs, including dedicating $60 million collected from insurers over the next four years to prevention efforts and encouraging the creation of “accountable care organizations,” groups of doctors and hospitals that work together to coordinate patients’ care.

One contentious proposal that was not included in the final bill would have imposed a “luxury tax” on high-priced medical providers and would have redistributed the money to struggling hospitals. Past investigations have revealed that large, prestigious providers — like Partners HealthCare, which owns Massachusetts General Hospital and Brigham and Women’s Hospital, both affiliated with Harvard — command substantially higher reimbursements from insurers than do their smaller and lesser-known peers.

In recent reports, Attorney General Martha Coakley, a Democrat, concluded that differences in payments to hospitals could not be explained by variations in quality, their mix of patients or the costs of academic medicine.

The bill would require that the new commission review providers that fail to meet the spending limits, and it would allow the attorney general to investigate those whose prices are “materially higher” than others’. But Nancy Turnbull, an associate dean at the Harvard School of Public Health, said the bill was “not nearly what we need to deal with market power and the unjustified price differences that result.”

The bill, Ms. Turnbull added, “still relies on the political will and resolve of political leaders to take action in the face of what will continue to be the overwhelming position and power of these dominant providers, and as this bill and others show, that is very tough to do.”

A version of this article appears in print on August 1, 2012, on Page A14 of the New York edition with the headline: Massachusetts Aims to Cut Growth of Its Health Costs. Order Reprints|Today's Paper|Subscribe